Two California men have been sentenced to prison for their roles in a conspiracy to defraud the Paycheck Protection Program (PPP) and for preparing false tax returns for professional athletes.
According to court documents and statements, Thanh Rudin was a principal of Mana Tax Services, a tax preparation business created in 2018. Seir Havana was the company’s Vice President/Director and Chief Executive Officer. Thanh’s brother, Quin Rudin, was the company’s Secretary, Director, and Chief Financial Officer.
Quin Rudin, a convicted felon, was still on supervised release for a different fraud scheme in California when the other frauds occurred. Since he had a criminal record, he wasn’t allowed to apply for access to taxpayer records with the IRS. Thanh Rudin applied to prepare and e-file returns in his place.
False Tax Returns For Professional Athletes
Here’s how the scheme worked. The defendants prepared and filed a series of false income tax returns on behalf of at least nine professional athletes. The false tax returns reported fictitious business and personal losses to generate fraudulent tax refunds. The defendants also filed amended tax returns for most of the athletes for prior years to correct what they falsely claimed were “errors” made by the athletes’ previous accountants.
The scheme, which began in the fall of 2019 and ran through the end of 2020, resulted in a tax loss of more than $20 million. The athletes involved were not alleged to have been aware of the fraudulent returns, and the athletes’ names were not released. However, the Washington Post suggested that at least one of the athletes—”Professional Athlete-7″—was affiliated with the Washington Commanders.
The defendants’ cut for their efforts? Mana Tax charged the athlete clients 30% of the fraudulent tax refunds.
Fraudulent PPP Loans
Apparently, that wasn’t enough for the Rudin brothers and Havana.
While the first scheme was ongoing, the Covid pandemic began—and that means that PPP loans were becoming available. In May 2020, Quin Rudin applied for a PPP loan of $730,932 for Mana Tax, claiming that they had 125 employees (they did not). Once that application had been submitted, the defendants began preparing and submitting false applications for PPP loans on behalf of small businesses, shell companies, and other business entities they controlled.
The cut this time? Why shy away from what was working? They again took a fee of 30% of the proceeds.
To support their claims for PPP loans, the defendants often prepared false tax returns for the businesses, and some business owners only saw their applications after Mana Tax filed them. The loan applications grossly inflated the number of employees and monthly payroll costs, when in reality some businesses had no payroll expenses and were not eligible for PPP loans.
In total, Mana Tax submitted 28 PPP loan applications. The amount of the loan applications hit $27,060,315.
As part of the investigation, the government seized more than $11.8 million of the fraudulent PPP loan proceeds from bank accounts controlled by the defendants. Havana also turned over $5.6 million in cashier’s checks, representing a portion of the fees charged in the fraudulent tax return scheme and a part of the fees taken from the fraudulent PPP loans.
In total, the schemes caused more than $44 million in losses to the US.
Punishment
All of the defendants pleaded guilty.
Thanh Rudin was sentenced to 34 months in prison on Feb. 10, 2023, and Havana was sentenced to 42 months in prison on Feb. 17, 2023. Quin Rudin was sentenced last year to 10 years in prison for his role in the scheme. In addition to prison, they will each make restitution.